Willhite v. Marlow Adjustment, Inc., 40531

• Decision Date: 21 July 1981
• Docket Number: No. 40531,40531
• Parties: Robert WILLHITE, Ann Willhite and Riviera Lanes, Inc., a corp., Plaintiffs-Respondents, v. MARLOW ADJUSTMENT, INC., a corp., Defendant-Appellant.
• Court: Missouri Court of Appeals

Page 254

623 S.W.2d 254

Robert WILLHITE, Ann Willhite and Riviera Lanes, Inc., a corp., Plaintiffs-Respondents, v. MARLOW ADJUSTMENT, INC., a corp., Defendant-Appellant.

No. 40531.

Missouri Court of Appeals, Eastern District, Division One.

July 21, 1981.

William Sitzer, S. E. Poludniak, Dubail, Judge, Kilker & Maier, St. Louis, for defendant-appellant.

Fred Roth, Clayton, for plaintiffs-respondents.

KELLY, Chief Judge.

Appellant, Marlow Adjustment, Inc., a corporation, appeals from an adverse judgment of the Circuit Court of the City of St. Louis in a declaratory judgment action instituted by the respondents, Robert Willhite, Ann Willhite and Riviera Lanes, Inc., a corporation, for a declaration of the respective interests of the parties in a $25,000.00 draft made payable to the parties as part of a settlement of a claim for losses suffered by the respondents by reason of two fires. We affirm.

This action had its origin in two fires-one on August 26, 1975, and the other on August 30, 1975-which damaged a building leased by Riviera Lanes, Inc. and the bowling equipment and other personal property the Willhites employed in the operation of a bowling alley and businesses ancillary thereto. ¹ The respondents, at the time of these fires, were covered by a valued fire insurance policy with the Proprietor's Insurance Company (hereinafter "Proprietors") in the amount of $275,000.00, and another such policy with Millers Mutual Insurance Company (hereinafter "Millers") in the amount of $1750.00.

On August 29, 1975, the respondents entered into a contract with appellant, a licensed public adjuster, to assist them in the adjustment of their loss sustained in the fire of August 26, 1975. For its service appellant was to receive ten percent (10%) of any amount received by the respondents from the insurance. ²

Thereafter, on August 31st, and October 22, 1975, respondents signed two more identical contracts with appellant. The second contract was for the fire of August 30, and the third for those items of personal property owned by the Willhites destroyed in the fire of August 26, 1975, and covered by a home-owner's policy issued to the Willhites by Millers.

On the morning of August 30, 1975, Raymond Davis, President of appellant, and Edward Lohmann, a fire loss estimator employed by appellant, met with Mr. Willhite for the purpose of inspecting the premises where the fire had occurred and estimating the loss sustained by the respondents by reason of the first fire. Mr. Davis and Mr. Lohmann learned of the second fire which had occurred earlier that same morning when they went to the bowling alley site-there were still some hot spots in the building and some smoke was still visible. Mr. Willhite met them at the bowling alley, they spent about 45 minutes inspecting it, and then went to the Willhite home where they occupied the rest of the day and evening making up an inventory of the items lost in the fire and an estimate of the value of the property loss the Willhites suffered.

After the first fire was reported Proprietors engaged the General Adjustment Bureau (hereinafter "G.A.B.") to investigate respondents' loss and a Mr. Jim McAliney, representing G.A.B. appeared at the bowling alley the day after the first fire, August 27, 1975, conducted an inspection of the premises, and conversed with Mr. Willhite. Mr. McAliney was seen by Mr. Willhite on two subsequent occasions; once at his home and another time at the bowling alley, but he did not talk with Mr. McAliney on either of these occasions because Mr. Davis had advised him not to do so.

Daniel Rabbitt, an attorney-at-law, was employed by Proprietors sometime in September, 1975, to coordinate the investigation and defend any suit that might be filed.

Appellant undertook gathering information necessary for the adjustment of the respondents' claim, including the preparation of a proof of loss for Proprietors, submitting it on or about October 23, 1975. This proof of loss was rejected by Proprietors on November 25, 1975, because the single proof of loss submitted covered "two separate fires and two separate claims, ..." Appellant was directed to resubmit two separate Proofs of Loss specifying separately the property damage in each fire, the exact amount of the actual loss, and the insureds' claim for each fire. According to this Proof of Loss the amount claimed under the policy was $329,640.80.

Appellant then prepared a separate Proof of Loss for each of the fires as directed by Proprietors. The amounts claimed under these were $129,850.41 for the August 26, 1975, fire and $199,790.39 for the August 30, 1975 fire; a total of $329,640.80. These Proofs of Loss were dated November 12, 1975.

In preparing the inventories and Proofs of Loss, it was necessary to establish the amount of the loss and this required that the value of various items damaged or destroyed in the fires be ascertained. Mr. Lohmann and other employees of appellant undertook this work. Invoices showing purchase prices were obtained from the Willhites and with the aid of these and other information Mr. Lohmann had, he assisted Mr. Davis in arriving at what they judged to be a fair market value, less depreciation, that would be incorporated in the respondents' claim. In conjunction with this phase of his work, Mr. Lohmann went to Kansas City where he interviewed Mr. Todd, a representative of the Brunswick Corporation, the mortgagee under a chattel mortgage on the bowling lanes and pinsetters, who furnished him with information about the Brunswick equipment in the bowling alley and its cash value. For the purpose of establishing the value of the items damaged by the fire, Mr. Davis and Mr. Lohmann contacted various persons and firms who were knowledgeable of these values, examined catalogs to ascertain the prices of other items, and formed an opinion of the replacement costs, less depreciation, of these items and incorporated them into Proofs of Loss filed with Proprietors and sent to G.A.B. Thereafter, Mr. Davis had numerous conversations with Mr. McAliney concerning the respondents' loss, on the phone as well as in person. He presented Mr. McAliney an inventory based on replacement costs and subsequently with a revised list of the inventory and cost. He and Mr. McAliney "tentatively agreed" that the Willhites' loss was $286,000.00, or a little more. In his opinion the claim was settled with Mr. McAliney for this amount but Proprietors would not pay the claim because Mr. Willhite would not submit to a polygraph test.

When no settlement was forthcoming Mr. Willhite and Mr. Davis met in Jefferson City on January 15, 1976, and visited with the Director of Insurance of the State of Missouri to see whether the state would do anything to assist them in getting the claim settled. Thereafter, the Willhites and Mr. Davis were notified by a letter of January 16, 1976, from Mr. Hebenstreitt, Proprietors' Claims Manager, that the fire of August 30, 1975, was started intentionally by someone and that he and Mr. Rabbitt had discussed the possibility that Mr. Willhite should submit to a polygraph examination and if all went well the matter could be brought to a conclusion much sooner than could be done if it was necessary for Proprietors to conduct a full scale investigation.

On January 22, 1976, Mr. Willhite responded to Mr. Hebenstreitt's letter of January 16, 1976, stating that he possessed no knowledge that the fire of August 30, was intentional or whether it was a part of the investigation and called upon Proprietors to complete the matter as soon as possible because, in his opinion, Proprietors was employing delaying tactics and had sufficient time to complete its investigation.

On January 26, 1976, Mr. Hebenstreitt wrote to the Willhites rejecting their Proofs of Loss of December 3, 1975, "on the grounds that the claims in both instances have been overstated," and told them to resubmit Proofs of Loss "reflecting actual cash value of each loss," reserving, however, the right to reject any new Proofs of Loss for arson, fraud or misrepresentations, available to the company under the terms of the policy or by law. On February 25, 1976, the Director of Insurance wrote Mr. Davis and advised him that the Legal Section of the Division of Insurance was of the opinion that requiring claimants to take a polygraph test might be a violation of the claimants' right to privacy under the Constitution and the Federal Right to Privacy Act, and that it might also be a violation of Rule 10.6, Para. 2(c), 2(d), 2(e) of the Code of State Regulations, but that this would be a matter only an insured could raise.

On June 2, 1976, Mr. Davis wrote to the Director of the Division of Insurance of the State of Missouri concerning Proprietors demand that Mr. Willhite submit to a polygraph test and stated that, in his opinion, by demanding that his client submit to the test, the insuror was not acting in good faith because the Willhites had complied with all of the policy provisions and he requested that the Division of Insurance assist in having Proprietors carry out its part of the insurance contract.

On this same date, June 2, 1976, Mr. Davis also wrote to Mr. Rabbitt advising him that Mr. Willhite did not feel Proprietors' request for a polygraph test was part of the contract of insurance and that it violated Mr. Willhite's right to privacy. He asked that the claim for the August 26 fire be settled on the basis of the Proofs of Loss submitted.

Mr. Hebenstreitt replied to this letter of Mr. Davis, stating that because of the "arson and other circumstances involved" although Proprietors "cannot legally compel Mr. Willhite to take a polygraph test, ... nevertheless, we feel this request is a reasonable one under the circumstances and he certainly should be willing to take the test to clear up this matter, so that we can resolve it promptly." ³

On June 9, 1976, the Division of Insurance replied to Mr. Davis' letter of June...